Mondragón: The Model For A Vibrant New Economy

Ask yourself, how does a community of 23,000 population generate the equivalent of $32 billion in revenues while eliminating unemployment and providing healthcare for all? Meet the Mondragón economic model.

Published: 21-Feb-2010

Pablo Picasso's Guernica is one of the most famous paintings of the 20th century, depicting the fascist bombing of the Basque capital in the north of Spain on April 26, 1937. The painting is well known, the tragedies of the Spanish Civil War less so, and almost entirely unknown is the fact that the Basque region of Spain is, today, the most prosperous part of the country, and a significant factor behind this is what's known as the Mondragón economic model.

The first time I'd heard of it was while reading this weekend William Greider's The Soul of Capitalism, a fascinating exploration into how to democratize the American economy. Now lest you think I am talking about 'socialism' or, worse, 'communism,' I am not. This is an entirely different take on good old-fashioned capitalism with the capital owned by the people who actually run the business: the workforce and managers. There are no outside shareholders; all of the capital in a business is owned by the people who work there; they are its sole investors. When you leave the company or retire, you take your shares of the business with you. Civil government also has no participation in the enterprise, unlike failed communism.

I learned about the 1980's BBC documentary below after posting some comments from Grieder's work on my Facebook page. I was taken by his remarks about the advantages of business self-ownership starting on page 84, especially the second argument: that it is necessary "to prevent an eventual economic and political crisis for the present system." Dennis Keim alerted me to the BBC documentary below after reading my comment.

Here is what I posted on Facebook from Soul of Capitalism:

As technology increasingly displaces labor in production processes, the depressing pressures on wage incomes intensify while the wealthy minority accumulates a still greater imbalance of power. The economic danger is an eventual failure of available demand when workers lack the incomes to purchase what the economic system can produce. When these conditions develop, the government will face unbearable pressures to enlarge the welfare state and to intervene more profoundly in the free-running economy.

For those of us here in America, look around you. Conservative "tea-partiers" are angry because they think the government is taking too much from them, while those who are suffering because of the increased consolidation of wealth and power into the hands of fewer and fewer people, want the government to intervene to compensate for what Greider argues above is the consequence of what is still, in effect, a feudal economic system. You'll have to read the opening chapters of Soul of Capitalism to fully appreciate how the fault lines of discontent in our current system can be found not only among blue collar workers, but also white collar managers and executives.

If you take the time to watch the documentary, you will probably ask what's transpired since it was produced in the early 1980s. An amateur video was shot within the last couple years of Georgia Kelley with the Praxis Peace Institute talking about her then-recent visit to Mondragón. When the BBC documentary was filmed, there were some 60 industrial and consumer cooperatives in the town. By the time of Ms. Kelly's visit, that had grown to 264 cooperative businesses, employing 100,000 workers and generating €24 billion in annual revenues. I would also encourage you to watch her talk, because it helps fill in some of the blanks left by the older BBC film.

Just as the Basques were able to recover from the devastations and privations of the Spanish Civil War and decades of Franco's dictatorship to build a thriving and equitable economic system where all share in the prosperity that is created by the hard work, thift and ingenuity of the people creating the wealth, I really think its time we take a serious look at the Mondragón model as a way to start to arrest the economic and political slide on which we find ourselves. But to do so, we are going to have to grow up and act with greater maturity, as well as empathy for others than we currently demonstrate. The success of the Mondragón model isn't so much about who owns the capital, as how they use it.

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